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T R E N D L I N E S W W W . T H E Z W E I G L E T T E R . C O M J a n u a r y 1 , 2 0 1 8 , I s s u e 1 2 2 9

Bonuses

Misconceptions about business

Zweig Group found that nearly one- third of all staff canvassed for its Best Firms to Work For Survey received a bonus in 2016. The average bonus as a percent of base salary, for the groupings analyzed, were: Entry level 3.8 percent; project engineer/ architect 6.3 percent; project manager 9.9 percent; and department manager 14.1 percent. OPEN FOR PARTICIPATION zweiggroup.com/survey-participation/ F I R M I N D E X Abramson Teiger Architects. .................12 AECOM. .................................................4 Burns & McDonnell. ................................2 CallisonRTKL. .......................................12 d3architecture.......................................12 ES-EN-EM............................................12 Ghafari Associates..................................4 HKS......................................................12 HOK. ....................................................12 Jacobs Engineering Group Inc..............10 KBR, Inc.. .............................................10 Kollin Altomare Architects......................12 LMN Architects.......................................8 McCarthy Engineering Inc.. .....................6 Perkins + Will........................................12 Schooley Caldwell Associates.................8 Standard Architecture | Design..............12 Studio Four Design. ..............................12 TLC Engineering for Architecture, Inc......8

O ne of the problems pretty much everyone in the A/E business has is finding enough people who can not only do their technical or design work but also can do the “business” aspects of our business. There’s a huge shortage of management and sales talent and that can be, at a minimum, an impediment to growth. In its worst case, it can kill the very business itself. One of the reasons why we lack managerial and business development-oriented people is that the technical and design people have misconceptions about business and businesspeople. These misconceptions keep people from learning about the business disciplines needed to effectively run an A/E firm. Not only have I witnessed this in my nearly 40-year career in this industry, but I see it today in engineering and architecture students who take my entrepreneurship classes at the the University of Arkansas. These misconceptions contribute to our dearth of business talent in this business. Here are some examples: ❚ ❚ There’s no science to business. Of course there is! There’s lot of science to it. Manage- ment is a science. Marketing is a science. Information technology is a science. And there’s plenty to know about human resources, finance, and accounting. You can get a Ph.D. in any of these disciplines. I think a lot of en- gineers and architects are surprised by how much knowledge there is out there on these subjects and many more aspects of business.

“All of these misconceptions hurt us. They keep our people from maximizing their individual potentials. And they hold our firms back. It’s only through education that we can dispel these myths.”

Mark Zweig

MORE COLUMNS xz MARKETING MATTERS: Deep six Page 3 xz M&A INSIGHTS: The seller series, part 3 Page 9 xz M&A INSIGHTS: Recession proof? Page 11

Conference call: James McCarthy See MARK ZWEIG, page 2

Page 6

T H E V O I C E O F R E A S O N F O R A / E / P & E N V I R O N M E N TA L C O N S U L T I N G F I R M S

BUSINESS NEWS BURNS & MCDONNELL EXPANDS PRESENCE IN OHIO WITH NEW OFFICE IN COLUMBUS With more than two decades of experience supporting clients across Ohio, Burns & McDonnell is expanding with the establishment of an office in Columbus, Ohio. The 119-year-old global engineering, architecture, construction, environmental, and consulting firm is positioning for rapid growth throughout the next five years with plans to hire 200 local employees by the end of 2022. “Columbus is leading the country in innovation and the perfect home for our growing team,” says Darrell Butler, Burns &McDonnell Columbus office manager. “While we’ve had a presence in the state for many years, we’re excited to be a part of this vibrant community and add local top talent to our diverse team of employee- owners.” Butler says the establishment of the more than 9,000-square-foot office in the heart of Columbus is reflective of Burns & McDonnell’s commitment to be a best place to work in the country. The office space – located near the Arena District – will feature an open floor plan, state-of-the-art conferencing technology, and virtual reality/BIM studio. The 100 percent employee-owned firm has been recognized by more than 20 publications as a top workplace and ranks No. 16 on Fortune ’s 2017 list of 100 Best Companies to Work For. Backed by an international team of more than 5,700, the Columbus office will provide a wide

Take your advice from Mark Zweig to-go.

range of engineering, construction, consulting, and environmental services. Employee- owners will bring experience in design-build project delivery to a wide range of markets, including oil and gas, mission critical facilities, power generation, electrical transmission and distribution, water and wastewater, manufacturing, and environmental permitting and remediation. One specific area of focus and growth will be within the data centers market. “With our society’s demand increasing for everything from smart cities to augmented/ virtual reality to mobile capabilities, the need for connectivity has never been greater,” says Sam Allen, Burns & McDonnell mission critical department manager in Columbus. “Every market indicator agrees this is a trending sector creating enormous opportunity to speed up development and increase flexibility in data centers.” To support clients facing the challenge of keeping pace, Burns & McDonnell is assembling a large team with integrated specialties who can take development of these mission-critical facilities from early planning, environmental and siting studies to full-scale engineering design and construction. The firm has successfully managed $200 million in projects across Ohio since 2015 and ranks among the best in the industry.

thezweigletter.com/category/podcast/

1200 North College Ave. Fayetteville, AR 72703 Mark Zweig | Publisher mzweig@zweiggroup.com Richard Massey | Managing Editor rmassey@zweiggroup.com Christina Zweig | Contributing Editor christinaz@zweiggroup.com Sara Parkman | Editor and Designer sparkman@zweiggroup.com Liisa Andreassen | Correspondent landreassen@zweiggroup.com

MARK ZWEIG, from page 1

❚ ❚ You have to be a good liar to sell stuff. This deep-seated, erroneous belief keeps a lot of design and technical professionals from selling. Their logic goes something like this: “To be a good seller you have to lie. Since I am not a liar I don’t sell. I am a better person than someone (a liar) who sells.” This one takes a lot of training to overcome. People need to see that in fact the best sellers are NOT liars. Instead, they build trust with their clients by telling them the truth. ❚ ❚ Entrepreneurship requires you to invent something new, something no one else has ever done before. It does NOT and this belief keeps so many people from becom- ing entrepreneurs. What entrepreneurship does require is that you do something better. It also requires you to build value in your business versus extract over time through operation. Entrepreneurial A/E firms do well through differentiation and innovation inside what is a very mature industry. ❚ ❚ You can’t get any creative satisfaction from business. As someone who also owns a design/build contracting and development company, I understand this sentiment. But what I’d like to say to the engineers and architects who think this way is: “Give business a chance. You might be surprised how satisfying it is to build a business rather than just building a construction project.” I have seen many talented design professionals suc- cessfully transition from designing projects to designing a business. Many find it more intellectually stimulating. The bottom line is all of these misconceptions hurt us. They keep our people from maximizing their individual potentials. And they hold our firms back. It’s only through education that we can dispel these myths. MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

Tel: 800-466-6275 Fax: 800-842-1560

Email: info@zweiggroup.com Online: thezweigletter.com Twitter: twitter.com/zweigletter Facebook: facebook.com/thezweigletter Published continuously since 1992 by Zweig Group, Fayetteville, Arkansas, USA. ISSN 1068-1310. Issued weekly (48 issues/year) $250 for one-year print subscription; free electronic subscription at thezweigletter.com/subscribe Article reprints: For high-quality reprints, including Eprints and NXTprints, please contact The YGS Group at 717-399- 1900, ext. 139, or email TheZweigLetter@ TheYGSGroup.com. © Copyright 2018, Zweig Group. All rights reserved.

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

O P I N I O N

Deep six

I f you’re still doing the same kind of marketing you were doing 10 or even five years ago, you’re probably seeing a decline in leads. If you haven’t yet, I promise you will. Keeping up with the latest and greatest in marketing is tough, but it’s easy to see what techniques need to be left behind.

Here are six different marketing trends and techniques that are as outdated as bell-bottoms: 1)Overly lengthy white papers. I know this one is going to be controversial. White papers were the “it” thing not too long ago, and definitely at the start and heart of the content marketing movement. Con- tent is key, content is good, but I can assure you of this: Everyone has content now and attention spans have been cut in half. Many A/E firms still spend a lot of time crafting very expansive 40-plus page technical documents with scores of exhibits and examples. If you do a white paper, stick to the following guide- lines: ❚ ❚ Twenty pages or less. Anything more is just too long! ❚ ❚ Put your white paper behind a “landing page” that is graphically pleasing and clearly explains why your audience should hand over their precious details and give up their valuable time to read it. Make sure your contact form isn’t unnecessarily long – you probably only need an email address. ❚ ❚ Promote it via social media. Facebook, Twitter, and LinkedIn are places people go to read up on interesting new techniques, approaches, and

project examples. If you’re not taking advantage of this audience, you’re missing out on valuable opportunities. ❚ ❚ Consider infographics or a video as an alternative or complimentary piece. Images and graphics are absolutely necessary. No one wants to read 20 pages of 12-point font. ❚ ❚ Webinars are a great way to promote and comple- ment your white paper! “Your average website visitor can pick out stock photos from a mile away. They will make your website look cheap and impersonal.” 2)Overt advertisements. “Use us because we’re the best” with a firm name and phone number will not get you leads anymore. You have to prove you’re worth a phone call! Show, don’t just tell why you’re the best. 3)Obvious stock photos. Have you seen the camera on the new iPhone 8? A 10-year-old can now take

Christina Zweig Niehues

See CHRISTINA ZWEIG NIEHUES, page 4

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

BUSINESS NEWS GLOBAL ENGINEERING AND ARCHITECTURE FIRM, GHAFARI ASSOCIATES NAMES SCOTT HEYWOOD VICE PRESIDENT Award-winning engineering, architecture, process design, and construction services firm, Ghafari Associates is excited to announce the promotion of Scott Heywood, AIA, to vice president. “Scott’s promotion is in recognition of his critical role in the growth we’ve experienced thus far in the country’s southeastern region, specifically in Birmingham, Alabama,” says President and CEO Kouhaila Hammer. “We are excited to see the expansion of Ghafari’s healthcare, higher education, and industrial and manufacturing footprint. He has been instrumental in selecting the right talent and growing our Birmingham office as a base to serve our clients in the region. We are thrilled at the future potential in this area.” “I am very excited to be a part of the continued growth and redevelopment of the city of Birmingham,” says Heywood. “I am honored to be entrusted to lead the Birmingham office and serve as a trustworthy resource for our key clients throughout the city and the entire southeastern region.” With nearly 20 years of industry experience, Heywood has developed and managed a broad project portfolio with a client roster including the University of Alabama at Birmingham, Auburn University, University of Michigan, Birmingham Jefferson Convention Complex, St. Vincent’s Health System, Aurora Health Care, U.S. Department of Veterans Affairs, Thompson Tractor, BMW, Mercedes- Benz U.S. International, Brose, and ZF Industries. Heywood holds a master of architecture, a master of engineering in construction

engineering and management, and a bachelor of science in architecture; all from the University of Michigan. He is a member of the American Institute of Architects and has participated in the Alabama Center for Architecture/AIA Birmingham’s N2 Architecture program to educate elementary school students on the significance of architecture. He is also an active participant in the development of the National Architects Registration Exam as a committee member serving the National Council of Architectural Registration Boards. AECOM ANNOUNCES EXECUTIVE LEADERSHIP APPOINTMENTS AECOM , a premier, fully integratedglobal infrastructure firm, announced executive leadership appointments for Fred Werner, Steve Morriss, and Lara Poloni, effective immediately. The promotions create a strengthened executive leadership team with diverse expertise in place to best achieve the company’s goals and strategic priorities. With nearly 40 years of industry experience, Werner has been named president of major pursuits, in which he will focus on leveraging the full breadth of AECOM’s design, build, finance, and operate capabilities on large, complex bids. Morriss, previously chief executive, Europe, the Middle East, India and Africa, has been named group president, design and consulting services, Americas, which was previously led by Werner. In tandem with these appointments, Poloni, previously chief executive of Australia-New Zealand, will assume the role of chief executive of EMIA. “As we continue to position our business to best capitalize on tremendous market opportunities, I am pleased to announce the promotions of excellent leaders who have

proven to bring a passion for executing our design, build, finance, and operate strategy,” said Michael Burke, AECOM’s chairman and chief executive officer. “At AECOM, we are fortunate to have assembled some of the best employees in our industry, and we remain committed to fostering a culture that provides opportunities for our professionals to grow their careers within our company. I look forward to these leaders bringing their diverse expertise to their respective roles across our enterprise.” In his long-tenured career,Werner has amassed an impressive list of accomplishments across the civil infrastructure landscape. His understanding of AECOM’s diverse, global business and offerings will help advance the company’s efforts in matching its unrivaled integrated solutions with prospective clients’ increasingly complex needs. Morriss brings substantial expertise and a unique client focus to the key Americas market. He joined AECOM in January 2011 from Mouchel where he served as managing director of government and business services. Additionally, his nearly 30-year career includes senior executive roles with Serco PLC and WS Atkins. Over a career spanning more than 25 years, Poloni has predominantly worked in the planning, assessment, and development of major infrastructure in the transport, energy, and telecommunications sectors. She has also been appointed to AECOM’s executive leadership team at the enterprise level. Her role leading Australia-New Zealand will be succeeded by Todd Battley, who has more than 20 years of experience with AECOM and the industry.

CHRISTINA ZWEIG NIEHUES, from page 3

basis. Changes in these numbers are the proverbial canary in a coal-mine when it comes to the future health of your firm. “Do you know your website views, sessions, bounce rate? Social media followers? Average likes and impressions? Do you know how many leads are coming in, how many proposals are being sent out, and average short-list and win rates?” 6)No CRM system. An Excel sheet is not the ideal place for client/potential client information, or even your newsletter mailing list. If you don’t have a good system that tracks your current and potential clients, what they are being sent, and who is communicating with them, then you are at a major disadvantage. There are so many options for affordable and efficient systems today. Use the technology to your advan- tage! CHRISTINA ZWEIG NIEHUES is Zweig Group’s director of marketing. Contact her at christinaz@zweiggroup.com.

a phone picture that is 10 times better than the professional photos of 10 years ago. Your average website visitor can pick out stock photos from a mile away. They will make your web- site look cheap and impersonal. There are amazing programs designed to help you customize un-obvious stock photos or your own photos for use in advertisements and even your website. Send me an email and I’d be glad to share some re- sources with you. 4)Spam marketing and list buying. CAN-SPAM specifically states that it is illegal to sell – and conversely, buy – email ad- dresses. It is, however, legal to “rent” a list, but it doesn’t work well! Spam your clients or potential clients with constant un-targeted email blasts and advertisements, and watch your contact list shrink at an alarming rate (see No. 6 for more on this subject). 5)Marketing without tracking. Do you know your website views, sessions, bounce rate? Social media followers? Aver- age likes and impressions? Do you know how many leads are coming in, how many proposals are being sent out, and aver- age short-list and win rates? These are just a few of the met- rics you need to know and need to be monitoring on a regular

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

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Attendees of The Principals Academy earn 12 PDH / 12 CEUs. Zweig Group seminars are eligible for Professional Development Hours credits and Continuing Education Units. All attendees receive a certicate of completion indicating the number of hours earned during each seminar. • Financial Management • Project Management • Leadership • Mergers & Acquisitions • Ownership Transition Planning • Recruitment and Retention environmental consulting rms, and is presented in tutorial and case study workshop sessions. • Business Planning • Marketing/Business Development • Accounting The Principals Academy is Zweig Group’s agship training program encompassing all aspects of managing a professional AEC service rm. It’s the most impactful two days you can spend learning about principal leadership, nancial management, recruiting, marketing, business development, and project management. The two-day agenda covers several critical areas of business management from the unique perspective of architecture, engineering, and

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THE ZWEIG LETTER January 1, 2018, ISSUE 1229

McC

P R O F I L E

Conference call: James McCarthy President and founder of McCarthy Engineering Inc. (Hot Firm #74 for 2016), a 41-person firm based in Wyomissing, Pennsylvania.

By LIISA ANDREASSEN Correspondent

“O ur philosophy is that no one can be perfect on their own, but together as a team perfec-

position of needing to carry a large debt service burden through a downturn. We reinvest in the firm to allow the firm to grow, flourish, and weath- er downturns. TZL: How do you deal with underperforming em- ployees? What are your steps for removal after they have proven to be ineffective, or even coun- terproductive, to your firm? JM: The first step is a thorough hiring process to avoid hiring non-performers. Even with that you can get an occasional non-performer. In the case of ineffective employees, we try to coach and train them to become effective team members. Their manager meets with the underperforming

tion is attainable,” McCarthy says. A CONVERSATION WITH JAMES MCCARTHY.

The Zweig Letter: The A/E market is great right now. What are you doing to cushion your firm in the event of a downturn? James McCarthy: Over the past three years, we’ve diversified into different market segments and service offerings. We’ll continue to do so to cush- ion against any type of downturn. We constant- ly look for unnecessary overhead and cash bleed- ers that negatively impact the company’s bottom line. We have also reduced debt so as not to be in a

James McCar- thy, President & Founder, McCarthy En- gineering Inc.

THE ZWEIG LETTER Jan

Carthy

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TZL: What’s the greatest challenge presented by growth? JM: Tough question since growth has many factors. But if I only get to pick one, then I have to go with maintaining the company culture as you grow in size. As the firm grows, you need to incorporate procedures and standardization that does not exist when a firm is smaller. This can be tough for the more tenured staff who remember when things were less formal. Keeping the culture can especially be challeng- ing when making acquisitions. Assimilating a whole other company that had its own different culture does not happen overnight. All of this is positive in the long-term, but it can cause issues in the short-term. TZL: What is the role of entrepreneurship in your firm? JM: Our goal is for every member of the firm to have an entrepreneurial mindset and understand the business as- pect of everything we do. We are very open with company financials and share performance indicators and news with our entire team regularly. Our goal is simple – we want ev- ery employee to think like they are an owner in everything that they do. Over our 18 years in business, as a testament to this, we’ve seen several team members move on to start their own engineering firms. TZL: In the event of failure, how does your firm react? JM: We identify the root cause of the failure, collectively de- velop a solution, and implement corrective actions in a col- laborative manner. We then share the lesson learned with the entire team to prevent the same failure from occurring in the future. Our philosophy is that no one can be perfect on their own, but together as a team perfection is attain- able. “We are very open with company financials and share performance indicators and news with our entire team regularly. Our goal is simple – we want every employee to think like they are an owner in everything that they do.” TZL: Monthly happy hours and dog friendly offices. What do today’s CEOs need to know about today’s workforce? JM: Today’s workforce is more mobile and less likely to stay in a position or with a company for an extended length of time than in the past. As leaders, we need to be open to their needs, give them an environment where they can be part of a team, and demonstrate that their ideas are valued by senior leadership. Training programs must be developed to more quickly onboard today’s workforce. The old days of putting them in a workstation and letting them figure it out over the next few years are a thing of the past. We have a See CONFERENCE CALL, page 8

employee and hey identify the areas of improvement and mutually develop an improvement plan which may include additional in-house or third-party training. If that does not prove effective, the manager places the employee on a formalized professional improvement plan which has specific milestones and goals. If they are not met, the non-performer is removed from the firm. standardization that does not exist when a firm is smaller. This can be tough for the more tenured staff who remember when things were less formal. Keeping the culture can especially be challenging when making acquisitions.” TZL: Firms that have principals and firm owners who lower their compensation and invest back into the firm perform better, grow quicker, and have higher valua- tions. How do you balance owner compensation with in- vestment in the firm? JM: We have historically invested significantly more into the firm to allow for continued growth, to weather down- turns in the economy, and to allow for growth without the need for lender financing. We look at the firm as a long- term investment and minimize short-term compensation to principals to support this methodology. TZL: How does marketing contribute to your success rate? Are you content with your marketing efforts, or do you think you should increase/decrease marketing? JM: We have clearly defined our brand and the ways in which we communicate that to our market. Equally impor- tant is making sure all the employees understand the brand and how they represent it any time we interact with some- one. We have outbound marketing programs that generate leads and opportunities from various sources. The strug- gle with marketing in our industry is doing effective B to B marketing with specific targeted potential customers. We find a concentrated and focused marketing and sales effort to be the most effective way of growing our business along with referrals from current and past customers and clients. TZL: If there was one program, course, or degree pro- gram that you could take or recommend before becoming a principal or owner, what would it be? JM: It would be a course in financial management tailored to the engineering field. We have sent our principals to the Zweig Principals Academy and they all came back with a much better understanding of the financial side of the firm and the impacts of all decisions. “As the firm grows, you need to incorporate procedures and

nuary 1, 2018, ISSUE 1229

BUSINESS NEWS TLC ENGINEERING FOR ARCHITECTURE, INC. ADDS PHILADELPHIA OFFICE TLC Engineering for Architecture, Inc. announces the opening of a new office at 1601 Market Street, Philadelphia, led by Tony Esposito, PE, LEED AP, managing principal and senior mechanical engineer. TLC is providing integrated MEP, fire protection, life safety, structural, technology, and energy services on numerous projects in the region, thus the new location reinforces the firm’s commitment to the region. “Long time clients and friends of our firm have engaged us on exciting projects in the northeast,” stated Michael Sheerin, CEO of TLC. He continued, “Tony’s knowledge of the region and willingness to return to the northeast combine to create an expansion that allows us to assist our clients from a local office, as well as expand our relationships and continue to grow our firm.” Ranked by numerous industry publications as a leading full service engineering firm, TLC works with architects and building owners to engineer facilities that are resilient, efficient to operate, and support the mission of the building owner. TLC provides engineering services for an array of market sectors, including healthcare, hospitality, offices, and education and is an acknowledged leader in high performance building design and operation. TLC Engineering for Architecture, Inc. is headquartered in Orlando, Florida with offices across Florida, Tennessee, Texas, and Louisiana and now Pennsylvania, providing engineering and energy services across America and around the world.

LMN ARCHITECTS EXPANDS AND RENOVATES THE GREATER COLUMBUS CONVENTION CENTER The Greater Columbus Convention Center expansion and renovation breathes new life into this emblematic civic complex. The $140 million, multi-building project adds 137,000 square feet of new space and renovates 800,000 square feet of the existing structure. Schooley Caldwell Associates served as associate architect for the project, with Corna Kokosing Construction Company and Elford, Inc. as construction manager. In the nearly 25 years since the original convention center was constructed in 1993, downtown Columbus has undergone a dramatic transformation. The new expansion reflects this growth, recalibrating the experience of the facility to the current urban fabric of the city – engaging the pedestrian activity and public spaces of downtown, as well as the thriving Short North neighborhood. The prominent new glazed civic entry embodies this transformation. “A driver for the expansion was to better integrate the building with the neighborhood and city,” notes Wendy Pautz, AIA, LMN Architects ’ design partner for the project. “Areas of glass reveal the activity happening inside the building to the outside world, most notably where the transparent pavilion meets the exterior plaza.” This transparency continues throughout the building with a new entry to the main exhibit hall and windows in the meeting rooms. Says Pautz, “The test of the project is how well it serves visitors and the surrounding urban

environment. Its success is as much about how it engages the street as what happens inside.” Inside, the renovation renews the original building’s complex composition of spatial experience. The distinctive, multi-layered finishes are enlivened through the use of color and light, while interior spaces are reimagined in response to today’s convention market with enhanced flexibility to accommodate a wide range of events. Sculptural lighting with custom color configurations animate the ceilings of the two multi-purpose ballrooms, enabling the interior expression to be choreographed to unique visual characteristics of each event and to complement the theatricality of the existing Battelle Grand Ballroom which LMN previously renovated in 2010. A series of pre-function spaces along the main concourse, which runs the full 15-acre extent of the north and south buildings, create a sequence of public spaces that activate the architectural experience with the social energy of the event. These nodes are defined by luminous glass walls and openings to the sky and street – providing internal daylight while further embellishing the building’s external presence as a prominent civic venue. Upgraded systems throughout the building include wall coverings, ceilings, carpeting, social seating, way finding, digital technology, sound systems, and lighting. The project anticipates LEED Silver Certification.

CONFERENCE CALL, from page 7

JM: The firm needs to take care of all employees, especial- ly your top people and provide what they need to flourish and be happy. That does not mean throwing more money at them. The company culture is the single most important as- pect of long-term retention of top people. Employees want to belong and be part of something positive and special. Each firm needs to build and promote their culture across the board and position the firm as a place where employees love to work. We are always recruiting, even when we don’t have a current opening. You need to build a bench of people who are in the industry so that you can reach out to them when a staffing need arises. TZL: What’s your prediction for the rest of the year and for the next five years? JM: Healthcare and logistics projects were strong in 2017. The same looks true for 2018 and 2019 based on speaking with our clients about their capital project plans for the next two years. Longer than that is hard to say. Typically, in a presidential election year, capital expenditures tend to drop off so we expect to see a softening of spending in 2020.

fun team that meets regularly to plan company events that cover the gamut – happy hours, parties, themed dress days, horseshoe competitions, sporting events, outdoor activi- ties, casino trips, amusement park trips, and fun contests like cooking competitions, best Halloween costume, “Big- gest Loser,” and more. “The company culture is the single most important aspect of long-term retention of top people. Employees want to belong and be part of something positive and special. Each firm needs to build and promote their culture across the board and position the firm as a place where employees love to work.” TZL: The talent war in the A/E industry is here. What steps do you take to create the leadership pipeline need- ed to retain your top people and not lose them to other firms?

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

O P I N I O N

The seller series, part 3

A confidential information memorandum, also referred to as the “deal book,” is a document drafted by an M&A advisory firm and used in a sell-side engagement to market a firm to prospective buyers. The confidential information memorandum will save you a lot of hassles when and if you want to sell your firm, so have one crafted.

The CIM is one of the most important documents prepared in the sales process, because it explains the intricacies of the firm being sold and provides a prospective buyer with the necessary information to generate an initial offer. This is different from a “teaser” because it contains detailed confidential information. Most design professionals understand the importance of investing in high-quality marketing material to sell their services, but many fail to appreciate the importance of possessing and maintaining professionally prepared materials within their own company. This investment is instrumental when it comes time to explore an M&A transaction. Having a well-crafted CIM will have a substantial impact on the success of the M&A process in three areas: speed, efficiency, and

buyer perception. It’s also important for the CIM to clearly articulate all of the firm’s attributes in order to fetch a premium valuation. WHY DO YOU NEED A CIM? After a prospective buyer has been identified and an NDA has been executed, what do you do next? This is where a CIM comes into play. Its purpose is to help other firms un- derstand your company and the unique strategic investment opportunity it presents. The typical components of a CIM within the AEC industry include: ❚ ❚ Executive summary ❚ ❚ Company history

Noah Hunt

See NOAH HUNT, page 10

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

BUSINESS NEWS JACOBS NAMED LEAD ARCHITECT FOR MAJOR REDEVELOPMENT OF SYDNEY’S CONCORD HOSPITAL Jacobs Engineering Group Inc. has been appointed by New South Wales Health Infrastructure as lead architect for the $270 million redevelopment of Sydney’s Concord Hospital. The redevelopment will involve the delivery of a new comprehensive cancer center, additional inpatient capacity, enhanced ambulatory care services, and Australia’s first comprehensive care center for retired service men, women, and their families – the Rusty Priest Centre for Rehabilitation and Aged Care. “This win reinforces our global reputation as a leader in healthcare facility design,” said Jacobs Buildings and Infrastructure Asia Pacific Senior Vice President Patrick Hill. “Concord has a long history of caring for veterans and their families, and we look forward to leveraging our health infrastructure knowledge in developing a facility that acknowledges their contribution and provides the patient care they need.” This facility will provide specialist services including substance and alcohol abuse programs, and services for mild traumatic

brain injury, specialist pain management, psychological well-being, rehabilitation, and family support. Jacobs was previously selected by New South Wales Health Infrastructure to carry out all the architectural work for Sydney’s Blacktown Hospital, which received three awards at the 2017 Design & Health International Academy Awards, including the prize for Best International Health Project Under 40,000 Square Meters. Jacobs is one of the world’s largest and most diverse providers of full-spectrum technical, professional and construction services for industrial, commercial and government organizations globally. The company employs over 54,000 people and operates in more than 25 countries around the world. KBR AWARDED PROJECT MANAGEMENT SERVICES CONTRACT FOR AUSTRALIA’S LARGEST UNDEVELOPED COPPER PROJECT KBR, Inc. announced it has been awarded a contract by OZ Minerals for project management services for the development of its Carrapateena copper-gold project located in South Australia. Under the contract, KBR will provide professional services for the execution phase

of the project as part of an integrated project team. KBR had previously been supporting OZ Minerals to finalize its early contractor involvement strategy and associated feasibility study activities. “We are excited to be working with OZ Minerals on the Carrapateena mine development to progress Australia’s largest undeveloped copper project,” said Greg Conlon, president Asia Pacific. “With an operating life of at least 20 years, Carrapateena represents a major growth opportunity for South Australia with around 1,000 jobs created from construction through to production and longer term business and employment opportunities for communities in the region.” “KBR brings decades of global project management experience to Carrapateena and we look forward to continuing our involvement in this landmark project,” added Conlon. Expected revenue from the contract will be included in KBR’s fourth quarter 2017 backlog of unfilled orders for its engineering and construction business line.

NOAH HUNT, from page 9

With a carefully crafted CIM, you can accomplish the equivalent of these conference calls, phone calls, and emails with one document. Once a prospective buyer reviews the CIM, they can quickly determine if they want to pass or move to the next stage in the deal process. Buyers will always want to speak with firm management over the phone, visit the firm in-person, meet the team, and tour facilities to get a clear picture of the firm. But the CIM should set the tone for all discussions and set expectations for the transition. Areas that should be discussed in detail include: ❚ ❚ Client diversification ❚ ❚ Ability and plan to achieve future projections ❚ ❚ Future growth opportunities ❚ ❚ Strength of management team ❚ ❚ Scalability of operations It is hard to believe, but I know plenty of business brokers who think that a CIM is too much work or that less information to the buyers is best. In my opinion, selling a firm without a CIM is a formula for frustration and, most likely, failure. Business brokers who rush to market and skip such a vital step will probably disappoint their clients. If you are considering selling your firm, I urge you to hire an M&A advisor who will invest the time to present your firm in a professional manner which you and your shareholders deserve. NOAH HUNT is a consultant with Zweig Group’s merger and acquisition services. Contact him at nhunt@zweiggroup.com or at 479.856.6244

❚ ❚ Professional services/capabilities and sample projects ❚ ❚ Management team structure ❚ ❚ Growth opportunities ❚ ❚ Competitive landscape or industry outlook ❚ ❚ High-level financials (five years of historical data and projec- tions, if available) “The CIM is one of the most important documents prepared in the sales process, because it explains the intricacies of the firm being sold and provides a prospective buyer with the necessary information to generate an initial offer. This is different from a ‘teaser’ because it contains detailed confidential information.” Apart from initial screening, a carefully prepared CIM will save you time in a number of ways. Imagine you approach 30 targeted potential buyers. Fifteen of the buyers express a preliminary level of interest, sign an NDA, and request additional information. Without having a prepared CIM, the next step would include participating in 15 separate conference calls, in which you would certainly need to answer the exact same questions again and again. The conference calls would lead to more one-off phone calls and emails leading to lost time and more costs for your firm.

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

O P I N I O N

Recession proof?

The next big downturn may or may not be just around the corner, but when it comes, and it will, will your firm be ready?

M any would argue that the next Great Recession, or worse, is just around the corner. It may feel like a long way off with the Dow Jones soaring, firms overloaded with work, and the biggest problem being the recruitment of qualified individuals. But now is the time to figure out how to position your firm to thrive in the next downturn.

Phil Keil

What are the roadblocks your clients face when buy- ing your services, figuring out what you do, or con- tacting you? When was the last time you updated your website and social media? Each step that makes “What is the difference between the firms that succeed in troubled times and those that don’t? The successful firms are market leaders and thought leaders that know how to take care of clients.”

What is the difference between the firms that succeed in troubled times and those that don’t? The successful firms are market leaders and thought leaders that know how to take care of clients. And being in that position is more about who you are than about what you do. It is your value set and principles that inform your actions which, in turn, attracts talent and clients. This is not a comprehensive list, but let’s talk briefly about a few things that your firm can do to become recognized leaders long before the downturn starts. ❚ ❚ Removing friction for clients. If you want your clients to be passionate about your firm, the key is to remove obstacles in their lives. Keep it simple.

See PHIL KEIL, page 12

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

BUSINESS NEWS STUDIO FOUR DESIGN TEAM WINS SOLOMON AWARD FOR CHURCH DESIGN Studio Four Design , a top architecture and design firm based in Knoxville, Tennessee, that specializes in worship facilities, was awarded a 2017 Solomon Award for design by the Worship Facilities Network for their work on the Grace Baptist Church student ministry building in Knoxville. The award was presented in the category of Church Design – Youth and Children’s Spaces for facilities with 301 to 800 seats. The Grace Baptist Church project began in 2016 and was completed earlier this year. Grace Baptist leaders wanted the new environment to be relational and fun for the youth of their church. These ideas became key concepts for the design and construction team of Studio Four Design. They needed the new building to complement the transitional style and materials of the existing church campus buildings, but also to be uniquely its own to reflect the brand and identity of Grace Student Ministries. “Expansion is a challenge for any church,” said Stacy Cox, president of Studio Four Design. “The leadership of Grace and their student ministry team had a strong vision, and it was our privilege to bring that vision to life. Our team did a great job of giving the new facility a look and feel that complimented the existing church, but at the same time, we were able to give it a generational vibe to resonate with the students who would enjoy spending time in the new space.” The centerpiece of this facility is a new student

auditorium. It provides room for more than 700 students in their mid-week service and is designed for a flexible arrangement of seating. Built at a cost of $3.5 million, Merit Construction was able to deliver this project on time and within the budget constraints of the church while working within a site in the center of an active church and Grace Christian Academy K-12 school, which is also located on the campus. Studio Four Design previously won a Solomon Award in 2016 for their work on the Northstar Church South Knoxville campus expansion. “The team at Studio Four Design is honored and humbled by winning another Solomon Award,” said Cox. “We cherish our relationships with churches like Grace Baptist and Northstar. It’s our passion to provide the very best environments for them through good architectural design which allows their facilities to be more effective tools for ministry.” LA ARCHITECTS DESIGN INNOVATIVE OUTDOOR SHELTERS FOR HOMELESS CATS One of this year’s most innovative design events, Architects for Animals “Giving Shelter” exhibit, returned to the HermanMiller Showroom in Culver City in October. The sold-out event benefits the Los Angeles-based non-profit FixNation, which provides free spay/neuter services for homeless cats (stray, abandoned, and feral felines). LA’s top architects and designers were invited to design, build and donate functional and one-of-a-kind outdoor dwellings for cats. The shelters were displayed at a cocktail

reception attended by the public, VIPs, and media representatives. Also on display were 28 cat food bowls decorated by feline-loving celebrities – including Jay Leno, Charlize Theron, Beau Bridges, Elvira, William Shatner, Clint Eastwood, Tricia Helfer, and Morgan Fairchild. “This year’s cat shelters were extraordinarily creative, and the designers put a great deal of time and thought into how cats would actually interact with the shelters,” says FixNation’s Co-Founder and Executive Director Karn Myers. “They are truly works of art with a practical application, and all the shelters are showcased in our online auction as well.” Los Angeles is home to one of the nation’s largest populations of homeless felines, an estimated 1 million to 3 million cats. FixNation is a model for successful Trap-Neuter- Return and humane colony management programs across the country and around the world. Myers and her late husband, Mark Dodge, founded the organization 10 years ago to provide a more effective and compassionate alternative to mass euthanasia. Participating design firms this year included Abramson Teiger Architects ; d3architecture ; ES-EN-EM ; CallisonRTKL ; HKS ; HOK ; Perkins + Will ; Knowhow Shop; Kollin Altomare Architects ; RNL now Stantec; Standard Architecture | Design ; and a collaborative project from Formation Association, Terremoto Landscape, and Arktura.

PHIL KEIL, from page 11

ensure that discipline does not impose artificial constraints or restrict thought, but contrary to what you might be thinking, this approach will allow you to be more flexible, adaptive, effi- cient, and creative. Operating within a set boundary, you can change people, plans, or leadership on a project because each person understands the expectations. “A careful balance must be maintained to ensure that discipline does not impose artificial constraints or restrict thought, but contrary to what you might be thinking, this approach will allow you to be more flexible, adaptive, efficient, and creative.” Implementing these ideas will position your firm as a recognized leader and will differentiate you from your competition. They will also help you survive troubled times and build a scalable organization. PHIL KEIL is a consultant with Zweig Group’s M&A services. Contact him at pkeil@zweiggroup.com.

your clients’ lives more difficult or time consuming leads to decreased motivation to do business with you. ❚ ❚ Organize your firm to align by market sector rather than geography or service discipline. The first step in the process is to identify the specific market sectors that make sense to establish as areas of differentiation. Once determined, the next step is to identify market sector leaders within your or- ganization who will function as the “CEO” of the market they lead. They should be visible on panels, in white papers, and on the firm’s website or blog. They will be charged with creating business plans that will be presented to the firm. These annu- al business plans should include financial projections, staffing needs, marketing opportunities, expansion initiatives, and research into their market sector’s evolving challenges for the clients served. It will become a retention, recruiting, and staff development tool as well as an accountability tool. ❚ ❚ Cultivating discipline to achieve greater freedom and flexibility. A firm that has disciplined standards and pro- cedures allows a firm to operate as a flatter organization and requires less centralized decision making. This frees up leaders to think more strategically and employees do not feel micromanaged. A careful balance must be maintained to

THE ZWEIG LETTER January 1, 2018, ISSUE 1229

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